Standard & Poor's Corp. has downgraded $74 million of outstanding Grant Hospital revenue bonds to BB-plus with a stable outlook from BBB-plus, the rating agency said in this week's CreditWeek Municipal

Cynthia Keller, a director at Standard & Poor's, said that the downgrade can be attributed largely to the Chicago hospital's "inconsistent financial performance."

In CreditWeek Municipal, the rating agency said that the hospital incurred a $3.4 million loss in fiscal 1992 after posting three years of profits. The loss was due to "about $2.5 million in one-time write-offs, coupled with declining volume and revenue that was not offset by similar expense reductions," Standard & Poor's said.

The medical center also had weak maximum annual debt service coverage of 1.13 times in 1992, the rating agency said.

Though cash reserves in 1992 totaled $17.7 million or 45% of total debt, anticipated losses in fiscal 1993 coupled with strategic capital outlays are expected to lower future cash reserves, the rating agency said.

The revenue bonds, issued through the Illinois Health Facilities Authority, were taken off of CreditWatch with negative implications -- where they were placed on May 17 -- in conjunction with the rating action, Standard & Poor's said.

The rating agency said fiscal 1994 operations are projected to break even assuming completion of personnel reductions, various contract renegotiations, development of a primary care physician group, and reductions in patients' length of stay.

Grant Hospital, a 350-bed acute-care facility located in a competitive service area with too many beds, is actively-soliciting proposals from parties interested in merging or affiliating with the institution, according to Standard & Poor's.

The rating downgrade did not reflect any potential benefits that may be derived from a merger or an affiliation, Standard & Poor's said. Officials from Grant Hospital could not be reached for comment.

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